Misc auto expense questions

[Penelope]

Still have some questions after reading section 10 of TTB.

If taxpayer can't switch from actual to mileage method in second year (which I guess he can't)---Can we amend the tax return filed in first year to go back and elect mileage method? (I'm guessing Not, but don't see it explicitly.)

Is there a limit to the number of miles that can be claimed using the full rate? Taxpayer has already driven 75,000 business miles in two years. If there is a limit, do we subtract the 17 cent's per mile (in 2005) for depreciation from the full rate when calculating mileage?

Thanks!

[KJ Judd]

You can always change to actual auto expenses. You cannot change from cents per mile to actual. Remember if you change to actual to figure the depreciation taken in prior years as part of the cents per mile rate is depreciation. (I forget the portion right now.

No limit on how many miles for cents per mile. If you drive a fuel efficient car with a lower FMV a lot of miles, cents per mile can be the way to go as there is no cap on depreciation.

[skhyatt]

Reading over TTB 10-5:
"To use the standard mileage rate for a car that is owned by the taxpayer, it must be used in the first year the car is available for business. Then in later years, the taxpayer can choose between either the standard mileage rate method or actual expenses."

Also,
"If the actual expense method is chosen in the first year, it must be used in all subsequent years until the vehicle is no longer used for business."

So if I'm reading correctly, if you want to use the mileage rate, you must choose it in the first year, but can change in later years. If actual is used the first year, you cannot change.

[Unregistered]

Vehicle Expenses

Standard Mileage rate used for first year vehicle placed in business you are allowed to switch between the methods in subsequent years.

Actual Expenses used in the first year you are not allowed to switch to standard mileage rate in subsequent years for this reason we always use std. mileage rate the first year without exception.

When you change from std. to actual you must make a prior period depr. adjustment to account for the depr. included in the standard mileage rate.

Profit

[Unregistered]

miles

You can use actual the first year, but you can't use MAC depreciation if you want to change to standard miles

[Possi]

amend allowed?

So, are we allowed to amend the prior yr to mileage?
Self-prepared in prior yr took commuting miles to figure %of bus. use and depreciated.
Took no other expenses on vehicle but that.

[John of PA]

Actual to Std is OK

Our policy is, in the first year, take whichever is higher, actual or standard. If actual is higher, I use SL depreciation so I can switch to Std in later years if I want to. Not sure if you can amend for auto method, but the benefit of amending would have to be worth our fee in doing the 1040X. One month to go, hang in there.

[Possi]

SL to mileage?

I thought you could not change methods from actual to mileage, period.
So, if they used SL depreciation, I can use mileage this year? The reason I ask is b/c the real mileage is low. The % of business use hardly makes it worth it to depreciate, so I'd rather use mileage. It's just easier.

[Gene V]

SL to Mileage

See TTB page 10-5 Author’s Comment: Straight line depreciation mentioned in IRS Pub. 463 in connection with the standard mileage rate is referring to pre-1981 straight line depreciation where the taxpayer estimates a salvage value and deducts the remainder straight line over the remaining useful life. Pre-1981 straight line cannot be elected in the first year an asset is place in service. So there in no way for a taxpayer to use the actual expense method in the first year and qualify for the standard mileage rate in later years. The pre-1981 straight line method seems to only be sanctioned in IRS Pub. 463 for a taxpayer that chooses the standard mileage rate in the first year and then switches to actual expenses in a later year.

[Bees Knees]

The question is, can you go back and amend the prior year return so that the standard mileage method IS being used in the first year?

Why not?

Its not an election that needs to be made on the original return.

[Possi]

Thanks, Bees

Thanks, Bees! Whew!